Global banks are facing billions of pounds-worth of civil claims in London and Asia over the rigging of currency markets, following a landmark legal settlement in New York.
Barclays, Goldman Sachs, HSBC and Royal Bank of Scotland were among nine banks revealed last Friday to have agreed a $2bn settlement with thousands of investors affected by rate-rigging in a New York court case.
Lawyers warned the victory opens the floodgates for an even greater number of claims in London, the largest foreign exchange trading hub in the world, in a sign that the currency manipulation scandal is far from over.
Banks could be hit as early as the autumn with claims in London's High Court from corporates, fund managers and local authorities, according to lawyers working on the cases.
In addition, investors are expected to bring cases in Hong Kong and Singapore, which are also home to large foreign exchange markets.
The US settlement comes just months after a record $5.6bn fine was slapped on six banks by regulators for manipulating the $5.3tn-a-day foreign exchange markets.
"There will be more claims in London than in New York because it's a bigger forex market," said David McIlroy, a barrister at Forum Chambers. A settlement in London could amount to "tens of billions of pounds", he said.
Analysts said it would be extremely difficult to assess the financial impact on banks at this stage. "We've put in some element of civil fines for all the banks we cover, but it's difficult to be specific because there aren't that many clear precedents," said one analyst who asked not to be named as he has not yet published research on the topic.
"We looked at this one last week with interest, but the range of outcomes [from civil suits] is still quite wide."
Lawyers at US firm Hausfeld who worked on the class action said the recent settlement was "just the beginning".
Anthony Maton, a managing partner at Hausfeld, said: "There is no doubt that anyone who traded FX in or through the London or Asian markets — which transact trillions of dollars of business every day — will have suffered significant loss as a result of the actions of the banks.
"Compensation for these losses will require concerted action in London."
Class actions are relatively new in Britain and, unlike in the US, claimants have to opt to join in the case, which can keep the settlement figures lower.
But new UK legislation that enables collective action to be brought in respect of anti-competitive conduct is expected to pave the way for more claims in London. Overseas investors could also claim in the UK, as the hub through which many forex transactions are processed.
"London has been and will continue to be a very attractive jurisdiction for claims, and [the new legislation] gives additional scope for that," said Edward Coulson of Hausfeld. "The US settlement covers mainly US investors: [but] London is about 40 per cent of the forex market, so there are a lot of other investors."
The other five banks that settled last week are Bank of America, Citi, BNP Paribas, JPMorgan and UBS. A further seven continue to face litigation in the US from investors over alleged foreign exchange manipulation, including Deutsche Bank, Morgan Stanley and Standard Chartered.
David Scott, managing partner of US law firm Scott & Scott, which was also involved in the case, said the settlement with the nine banks went "a long way to ensuring that they are being held accountable for their egregious manipulation of the foreign exchange market".
The US investors alleged that the world's largest financial institutions conspired to manipulate the foreign exchange market as far back as 2003. The conspiracy affected dozens of pairs — the value of one currency versus another — including seven pairs with the highest market volume.
Aside from cases brought by investors, global banks have been hit with penalties from regulators for rate-rigging misconduct. Last November, six banks paid $4.3bn in fines to British and Swiss regulators. The UK's FCA said the forex misconduct was carried on from 2008 until October 15, 2013 — several months into the launch of its probe.
Giles Williams, regulatory partner at accountancy firm KPMG, noted the size of the US settlement was much smaller than the fines imposed by regulators for alleged forex rigging.
"Is therefore the size of some of the regulatory penalties a punishment for behaviour rather than investor loss?" he said.
He said he would be "surprised" if banks had not already made provision for the latest settlement amount.
The banks declined or could not be reached for comment.